We hear all the time from Donald Trump and others that “nothing is made in America anymore” because all of the U.S. manufacturing jobs have supposedly vanished to China, Mexico, and South Korea. The underlying, but false, assumption of those claims is that if the manufacturing base is shrinking in the United States, those losses here must be accompanied by offsetting gains in manufacturing output and employment somewhere else in the world.
While it’s true that there has been a gradual decline in U.S. manufacturing’s share of gross domestic product (GDP) over time, the chart above shows that the downward trend is not at all unique to the United States but is in fact a truly global phenomenon. Based on international data from the United Nations, global manufacturing output as a share of world GDP fell from 27 percent in 1970 to less than 17 percent by 2009. During that same period, the trend in the United States was very similar, with the manufacturing/GDP share here falling from 24.5 percent to 12.9 percent.
Bottom Line: The declining share of manufacturing’s contribution to GDP reflects a global trend as the entire world moves increasingly towards a more services-intensive global economy. When people complain that “nothing is made here anymore,” it’s not really true that somebody else is manufacturing the goods that we used to make in America. The reality is that because of ongoing gains in productivity and lower prices, we (and others around the world) just don’t need to spend as much on manufactured goods any more in relation to the overall size of the economy. And we’re all better off because of that global “decline in manufacturing.”